Follow the Hummer
When we lived in the San Diego area last year, the real estate market was doing fairly well. When we accepted an offer in Utah, we placed our home on the market in November and it sold in early January. During that time, a house sitting for more than a few weeks was a sign of a down market, or so people thought.
It’s very different now. Apparently, San Diego real estate has blown up; homes are sitting for several months, sellers are stubborn to drop their prices and, as a consequence, foreclosures are sky-rocketting.
Thankfully, we weren’t as unwise as some people were and are: many people borrowed up to 2x or more the value of their home and are now completely upside-down in the real estate market, which means they owe much more than their home is worth. We sold our home right on time and we weren’t unwise with the equity of home.
The down San Diego real estate market is giving rise to a market of risky investors. Here’s a quote from an investor who shares his search strategy for foreclosed homes:
If you’re looking for the next foreclosure, follow the Hummer,” Shepner says. “A lot of these Hummers were paid for out of equity lines and refinances — and the Lexuses and the Mercedes. Maybe I’m being too cynical, but we’ll see what happens.
Pretty wise strategy, I think. Here’s more from that same real estate investor:
Others homeowners never really had any equity to begin with. Aggressive lenders made it possible for many families to buy into the pricey San Diego market with little or no money down and low, introductory interest rates. When the monthly payments increase, some of those families can’t afford them. And with home prices now flat or dropping, it’s getting harder to sell and walk away.
Their income maybe was never enough to afford the loans, and their adjustable-rate mortgages are kicking in, and there’s going to be some blood flowing in the streets.
In an interview, Burns said the time for buying is almost ripe. More than 2,300 San Diego households defaulted on their mortgages in the last three months. That’s the highest number of defaults in more than eight years.
For more on the real estate bubble bursting in San Diego, this NPR article is great.
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